28 February, 2021

Global Trust Burst

The Oriental Bank of Commerce taking over Global Trust Bank may save the depositors. The small shareholders will be hit. But why did the RBI do what it did? Updates

P. Anil Kumar
Global Trust Burst
It seemed like a happy ending to a Bollywood horror film. But it began like the worst-possible nightmare: the potential collapse of India's shining star among private banks. That was on Saturday the 24th, when the Reserve Bank of India (RBI) declared a virtual freeze on the operations of the Global Trust Bank (GTB). The central bank said that GTB's net worth had turned negative, it was incurring huge losses and was saddled with mounting non-performing assets (NPAs) or loans that cannot be recovered. As most of its one million depositors went into a tizzy—some depressed, a few volatile as they tried breaking the bank's ATMs—government officials went to great lengths to pacify them. The message: don't panic, depositors' money is safe, nothing will happen to the bank, it's only a moratorium and not a closure.

Within 48 hours—it's difficult to imagine the RBI acting so promptly—the situation was under control. At 11.20 Monday morning, the government announced that GTB will merge with Oriental Bank of Commerce (OBC), thereby ensuring that the former would survive and its...

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